Which function is performed by Financial Markets by linking the savers and investors and by mobilizing funds available for investment into the most productive investment opportunity?

Allocative function

The correct answer is Option (1) → Allocative function.

Allocative function is performed by Financial Markets by linking the savers and investors and by mobilizing funds available for investment into the most productive investment opportunity.

A business is a part of an economic system that consists of two main sectors – households which save funds and business firms which invest these funds. A financial market helps to link the savers and the investors by mobilizing funds between them. In doing so it performs what is known as an allocative function. It allocates or directs funds available for investment into their most productive investment opportunity.